EpiPen maker knew taxpayers were overcharged for years – and did nothing about it

EpiPens are a life-saving device for thousands of people who have severe allergies. The device dispenses epinephrine to counteract anaphylactic shock and are a staple in school nurses’ offices and moms’ purses.

But taxpayers may have overpaid Mylan, the drug company that manufactures EpiPens, by as much as $1.27 billion between 2006 and 2016. The discrepancy stems from a misclassification of the drug by the Medicaid Drug Rebate Program, which is run by both the federal Centers for Medicare and Medicaid Services (CMS) and State Medicaid Agencies.

“CMS recently provided records to the [Judiciary] Committee that show Mylan was made aware of the misclassification years ago but did nothing,” Sen. Chuck Grassley, R-Iowa, said in a statement. “It looks like Mylan overcharged the taxpayers for years with the knowledge EpiPen was misclassified.”

The Medicaid Drug Rebate Program helps offset costs of most outpatient prescription drugs for program enrollees. Drugs can be classified as either brand name or generic by the pharmaceutical companies, and they pay rebates to the program accordingly. Brand-name drugs are assessed a higher rebate than generic ones, meaning a company would owe more on drugs that are brand name. Although EpiPens are a brand-name drug, Mylan classified it as a generic, meaning it paid only 10 percent of sales instead of 23.1 percent.

“In addition, if EpiPen had been classified as a brand-name product, Mylan would have been required to pay inflation-related rebate amounts for EpiPen if its price increased faster than the rate of inflation,” said the Office of Inspector General at the Department of Health and Human Services.

Last October, Mylan reached a settlement with the Justice Department to pay $465 million for the misclassification, nowhere near the more than $1 billion it owes based upon the inspector general’s estimate. Mylan did not admit wrongdoing in the settlement.

Glassley blamed the Obama administration for not correcting the payment error and said the government “needs to do a much better job of holding companies to their commitments in federal health care programs.”

“Mylan’s outrageous multiyear classification has cost American taxpayers not just millions but billions,” said Sen. Richard Blumenthal, D-Conn. “The Department of Justice's deal is completely insufficient — a shadow of what it should be.”

Mylan was under fire last year when it raised prices of EpiPens, for which there is no viable generic alternative, to more than $600 for a two pack. That marked a 450 percent increase since 2004, when one dose (adjusted for inflation) cost $100. The devices have been sold in pairs since 2010.